Dongfeng Motor expects sales of cars from its Japanese partner Nissan to resume growth in April.

But the group, which also partners with Honda, Peugeot and Volvo, set a modest sales growth target of 7 per cent, or 2.35 million vehicles, this year.

The state-owned carmaker, the mainland's second-biggest by sales, said the territorial dispute between China and Japan over the Diaoyu Islands, which prompted a nationwide boycott of Japanese goods in August, would continue to shadow Japanese cars sales on the mainland. But chairman Xu Ping said Nissan should see a big turnaround next month.

"Sales remained sluggish before Nissan launched its new Teana on March 18, but since then they already have received an encouraging 15,000 to 16,000 orders for the model. We believe by April sales will see a complete turnaround," Xu said.

The group's other Japanese partner, Honda, still reported falling growth last month, but at a lower rate. Honda was the only Japanese carmaker in China to have a 10 per cent rise in sales last year. The territorial dispute, together with the slower economy and stronger competition, squeezed the group's revenue and gross profit margin last year. Its net profit fell 13.3 per cent to 9.09 billion yuan, while gross profit margin dropped 1.2 percentage points to 20.8 per cent.

A sharp fall in its commercial vehicle sector contributed to the decline in profitability, although the group said its new partnership with Volvo should soon create new momentum.

While the group can produce 2.69 million cars a year, Xu said it needed to optimise product mix to improve profitability. That meant cutting supply of its heavy-duty trucks and the Liuqi multipurpose vehicles this year.

But Dongfeng said it would invest more in research and development and keep looking for acquisition prospects following the failure of talks with troubled US electric carmaker Fisker.

Xu confirmed yesterday the group dropped the Fisker deal due to "discrepancies between the group's expectation and reality". Reuters quoted sources saying Dongfeng was put off by Fisker's loan obligations to the US government, which would make it impossible to move Fisker's production line to China.

This article appeared in the South China Morning Post print edition as Dongfeng Motor aims for 7pc lift in Nissan sales